Nuclear Industry

Industry Overview

In the past 10 years, China has become the world’s largest consumer of energy, surpassing the United States in 2010. In 2011, China’s energy supply and demand both surged ahead at an amazing pace in the shadow of its 9.3% GDP growth. Total energy consumption increased by 7% equivalent to 3.48 billion tons of standard coal while the amount of electric power generated grew by 12% in 2011, to 4.6 trillion kWh.

Holding 89% of the overall market, thermal sources still account for the bulk of the energy generated in China. In contrast nuclear power only supplies about 2% of China’s overall electricity needs, with a generating capacity of around 12.5GW. As of mid-2012, China was home to 15 operating nuclear reactors, most of which had an operating capacity of below 1GW.

The nuclear power industry in China is tightly controlled and dominated by a number of local players. As of 2007, the National Nuclear Safety Administration (NNSA) has approved three companies to hold full ownership and maintain nuclear power plants. These are: China National Nuclear Corporation (CNNC), China Guangdong Nuclear Power Group (CGNPC) and China Power Investment Corporation (CPI). Other companies, both foreign and domestic, are restricted to holding minority stakes in nuclear projects.

Market Opportunities

As energy consumption rises in China, government and industry leaders are increasingly looking towards nuclear power to establish a balanced mix of energy generating methods. To this end, China is looking to treble its number of operating nuclear plants through the construction of 32 new reactors by 2020, producing around 80GW by that date. If this figure is achieved, China alone will be responsible for half of the world’s growth in nuclear power production in the next few years. Beyond the next decade, estimates vary as to the extent of China’s nuclear growth. However, many analysts suggest that nuclear power could produce as much as 200GW by 2030 and might supply 400-500GW by 2050, accounting for 15% of China’s overall energy needs.

Much of this growth in power generation will come not only from the construction of new nuclear sites, but also from the development of more advanced plant designs. Whereas most plants currently in operation have a production capacity of less than 1GW, the vast majority of reactors currently under construction are using more advanced designs. The designs most favored in current construction plans are the CPR-1000 and American designed AP1000 generators, which have a production capacity of around 1.25GW. In the case of the AP1000, this imported design is forming the main basis of China’s move towards 3rd generation nuclear technology.

Best Prospects

While China recognizes the need to import foreign technology, it also wants to localize as much of this technology as possible and China continues to demand full technology transfer and localization whenever possible. As a result, many U.S. power equipment manufacturers and related construction and engineering firms formed joint-ventures in this market.

Given the enormous growth in the Chinese nuclear industry, foreign companies looking to do business in the local market have several avenues of approach. As development of new nuclear plants continues, surveying, construction and construction equipment services will be in high demand. Furthermore, as domestic energy firms are looking improve reactor design, U.S. companies with a specialty in advanced reactor technology have opportunities to cooperate in reactor production. As a case in point, Chinese power utilities are currently collaborating with a U.S. company in the development of the new CAP1400 reactor, capable of producing and output of 1.5GW. In addition, while most current designs including the AP1000 are Pressurized Water Reactors, China is looking to move towards the construction of more Fast Neutron Reactors (FNR). Beyond standard technologies, Chinese firms are also eager to explore alternative nuclear reactor designs including “pebble bed reactors” and “molten salt reactors”.

In the wake of the Fukushima Daiichi nuclear disaster, efforts have been focused on improving safety standards across the industry. China currently operates several types of nuclear reactors using multiple technologies, making safety management a significant challenge. The MEP has suggested that China may have to spend as much as $12.5 billion over the next 3 years to 3rd generation safety standards across all of its existing plants. Given this expected outlay, U.S. companies with significant experience in nuclear safety management and technology will have significant opportunities in China over the next few years.

Regulatory Environment

In contrast to the situation in much of the rest of the world, China’s regulatory environment is relatively supportive of nuclear development. The Chinese government has a strong interest in diversifying the country’s energy supply and in promoting the cleaner production of energy. Indeed, in the government’s 12th Five Year Plan the country’s leaders committed themselves to several ambitious targets including a 16-17% reduction in energy and carbon intensity and 11.4% share of non-fossil fuel in energy mix by 2015. Given these regulatory incentives, it seems that China will continue to support the development of the nuclear industry in the future.

In the short term, however, the Fukushima Daiichi incident has brought some degree of regulatory uncertainty to the industry. Immediately after the disaster, the Chinese government suspended the approval process for all new nuclear sites and announced an immediate safety review for all existing nuclear facilities. In addition, the government committed itself to the development of a new safety plan and improved regulatory oversight of the industry. To this end, the government recently released the Nuclear Power Safety Plan (2011-2020) which seeks to belay concerns that China will forego safety procedures as it seeks to rapidly develop its nuclear industry.

As of October 2012 the State Council has resumed approval of construction for new nuclear plants, albeit at a slower pace. The Mid and Long-Term Plan for Nuclear Power (2011-2020) emphasizes that construction of new sites will, up to 2015, be limited to coastal areas where the chances of earthquakes remain small. While this framework has brought some clarity to the picture, a degree of uncertainty will linger until China releases a complete atomic energy law.

Other Resources

ECP Nuclear Power Working Group

Launched in May, 2012, the Nuclear Power Working Group (NPWG) is the newest addition to the public-private partnership platform of the US-China Energy Cooperation Program (ECP). As part of ECP, the NPWG is a commercially led platform that currently represents American companies who work across the entire nuclear value chain. Bi-lateral advocacy efforts focus on improving technical standards, specifications and requirements in the aspects of safety, control valves and fuel resourcing, etc. Those efforts, in the medium-term, aim to create market entry for advanced US technologies and products to China, and supports the development of world-class protocol. Click here to learn more.

This is a joint publication of the Nicobar Group and the U.S. Commercial Service highlighting the nuclear power generation industry in China.

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U.S. Commercial Service Specialists

The U.S. Commercial Service offers a broad array of market entry services to U.S. companies in the nuclear industry. Please refer to the following relevant contacts for additional information on how we can help you expand your business in China.